In applying the high-low method of cost estimation to mixed costs, how is the total fixed cost estimated?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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In applying the high-low method of cost estimation to mixed costs, how is the total fixed cost estimated?

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Step 1 Concept of mixed cost , variable cost and fixed cost

Mixed cost also called the semi variable cost . Mixed cost contains both fixed and variable cost .

Example - Electricity charges ( Minimum fixed charge plus consumption charge)

Fixed cost - Fixed cost is the cost that remains constant irrespective of the production activity of the entity . 

Example - Office rent , Salary to Office staff , Watch man salary etc

Variable cost - Variable cost changes with the change in number of units of production.

Example - Direct Material , Direct labour etc

 

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